Cheney, Putin, and the Battle for Iraqi Oil

Jonathan Cutler

August 13, 2007

Vice President Cheney allegedly continues to beat the drum for war with Iran. The McClatchy Washington Bureau reported as much last week:

Vice President Dick Cheney several weeks ago proposed launching airstrikes at suspected training camps in Iran run by the Quds force, a special unit of the Iranian Revolutionary Guard Corps, according to two U.S. officials who are involved in Iran policy.

The Bush administration has launched what appears to be a coordinated campaign to pin more of Iraq’s security troubles on Iran.

Last week, Lt. Gen. Raymond Odierno, the No. 2 U.S. military commander in Iraq, said Shiite militiamen had launched 73 percent of the attacks that had killed or wounded American troops in July. U.S. officials think that majority Shiite Iran is providing militiamen with EFPs, which pierce armored vehicles and explode once inside.

General Petraeus is a very impressive officer… I don’t want to put the whole burden on him… there are a lot of people working at it, too. General Ray Odierno, who is his number two, a superb officer. A man who spent about 28 months in Iraq himself so far, whose son served and lost an arm, who is dedicated — is just as dedicated as Dave Petraeus is to the success of this enterprise.

Perhaps all this anti-Iranian talk risks undermining the Bush administration’s relationship with Shiite-led political figures in Iraq.

But the White House appears to be working hard to maintain the image of a distinction between the Maliki government and the Iranian regime–even if neither Maliki nor the Iranians appear to put much stock in the distinction. Al Jazeera reports:

When asked whether he thought al-Maliki shared his views on Iran, Bush said: "So the first thing I looked for was commitment against the extremists.

"The second thing is 'does he [al-Maliki] understand with some extremist groups there’s connections with Iran’, and he does. And I’m confident…

"Now, is he trying to get Iran to play a more constructive role? I presume he is. But that doesn’t - what my question is - well, my message to him is, is that when we catch you playing a non-constructive role there will be a price to pay."

The White House later clarified with Al Jazeera that Bush was referring to Iran when talking about a price to pay.

All of which goes to the central question: is Cheney secretly horrified by the Maliki government? Is there anything to the old assertion from the Economistthat Cheney was "said to favour an alternative Shia leader as prime minister"?

But it also may help clarify Cheney’s enthusiasm for the Sistani-backed regime in Iraq.

If the US invasion of Iraq was motivated, in part, by the desire to prevent Russia from winning access to Iraqi oil after the collapse of UN sanctions, then Cheney is being well served by his Shiite friends in Iraq.

I first made that argument in an April 2007 post entitled, "The US-Russian War in Iraq" in which I suggested that the details of the draft hydrocarbons law tended to leave Russian-backed companies–especially Lukoil–out in the cold.

In meetings with Shahristani, Russia sought to use the promise of debt relief to win better terms for Lukoil. According to Kommersant, that plan to make debt relief conditional appears to have crumbled:

It was Iraq’s Oil Minister Hussein al-Shahristani that announced yesterday the results of his Moscow meeting with Russia’s Industry and Energy Minister Viktor Khristenko. According to al-Shahristani, Russia confirmed it would fully execute Paris Club’s decision to write off the debt of Iraq and today’s concern is ensuring some technical procedures. Writing off is conditioned to nothing…

Paris Club raised the issue of writing off $140 billion from Iraq after the U.S. invasion of 2003. Russia pressed for conditioning its pardon to reviving the West Kurna-2 agreement but wasn’t backed up by other creditors. So, the agreement of 2004 spells out writing off 80 percent of amount due to Paris Club nations….

The agreement on Iraq’s debt will be inked till this year-end, Deputy Finance Minister Sergey Storchak announced not long ago. Hussein al-Shahristani was expected to deliberate on the terms of the deal in Moscow, but the minister arrived with no authority given to the effect. As a result, Russia was forced to confirm adherence to Paris Club commitments without additional conditions.

"Lukoil has done much in Iraq, has experience of working in our country, possesses vast data about Iraqi oil deposits. These temporary advantages raise the company’s chances for winning free and transparent oil tenders," the minister said.

But this sweet talk tended to obscure the real issue of control over the enormous West Qurna fields. The oil industry journal, Platts, explains:

Shahristani, who spoke at a press conference in Moscow, said Iraqi
oilfields currently in operation, including West Qurna, would fall under the
control of the national oil company.

"For the discovered fields where there are no risks involved…we do not
see any necessity for foreign companies to take control. We think the Iraqi
national oil company can do it with the cooperation with other oil firms," he
said.

"All the discovered and producing fields will be assigned to the national
oil company, this includes West Qurna," Shahristani said. "It is up to the
Iraqi national oil company to decide how it can develop that field."

In other words, the West Qurna field will be under the political control of the national oil company under a Shiite-led, US-backed administration.

"Assigning oil fields to the National Oil Company means that the company will have the right to choose foreign companies under contract terms," Hussain al-Shahristani told a news conference in Moscow….

Under the [Saddam-era] West Qurna deal, LUKoil held 68.5% and Iraq’s SOMO organization 25%.

In other words, Russia can forget about control.

As for the new fields, Shahristani has not ruled out the "necessity for foreign companies to take control."

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